#78: How to Avoid FOMO When Investing

Foreign. Welcome to the Passive Income MD podcast where we talk about creating your ideal life through multiple streams of income. I'm your host, Peter Kim. If you enjoy hearing about this stuff, make sure to hit subscribe so I can bring it to you every week. Now let's get on with the show. Hey everyone, hope you're having a great day. Just before we get to today's episode, I wanted to say that last week certain members of our community, the Passive Income MD community, the Platinum Investor Club and Leveraging Growth Accelerators, we had an awesome meetup. We had a meetup here in Southern California trying to obviously stick to safe protocol, but we had an outdoor meetup and we had nearly 40 people there and it was amazing to get together to meet other members of the community in real life, see each other's faces and just have a good time talking about our goals, our years, what are, you know, just sharing information. And if you're part of that, it was awesome to see you there. We're gonna try to do more of these meetups around the country. Again, as safe as possible. And if you're interested in that, we have a form you can fill out. Just say like, hey, I'm in this area and I'd like to be notified when we have any certain meetups in that area for any of our communities. Definitely look for that on our site. If you go to passiveincomemd.com podcast78, you're gonna see the show notes for this podcast in particular and then you're also gonna see that form as well, so you can sign up there. We'd love to see you at one of these events. It's just great getting together with like minded people and just having a good time. All right, so I hope to see you there and let's get on with the episode. All right, how many of you know what the word FOMO is, right? Fomo? I'm assuming that most of you know, but for those who don't, it's, it's an acronym. It stands for Fear of Missing out. Now I'm sure at some point in your investing career, your life, you've probably heard of some sort of investment, a stock, bitcoin, something that's gone on some sort of ridiculous run and you've like felt like, you know, you're kicking yourself for not getting in earlier. I think, I think we've all been there. The cliche is though, absolutely true. Hindsight is indeed 2020. I mean, like, if you look back, like, yeah, I mean, how many people would have actually purchased Amazon or Apple back in the 90s when people didn't know as much, especially about Amazon. I mean, obviously, knowing what I know now, I mean, I would have just dumped my money into those stocks or I would have bought as many properties in certain areas of town, especially certain areas of Los Angeles that I know. Maybe even right after the last recession, I would have gone for it, right? Gone full, full tilt and just gone for it. But however, we have to realize that, you know, investing as in life, like capitalizing and really just taking a hold of every opportunity, it's just impossible, right? I mean, we all think about the hypothetical returns that we missed out on, which honestly just, it's a lot of wasted time and effort. It creates that sense of FOMO that we talked about, right? The fear of missing out. And what happens is, though, if it takes a hold of you, it may lead you, and I know it does for me, to chase like that next one, right? The next hot tip or stock or investment. And that can often lead to pretty poor results. So let's just talk about FOMO real quick. I mean, like, it's partially associated with some sort of. I mean, it's almost like with like a social anxiety, I'd say, that results in part from watching like the best of or like the highlight reels of other people's lives. And a lot of times we see that on social media, right? We have those friends on Facebook or Instagram and they have like, you know, they're going on some amazing exotic vacation, like still now, but even before, it's hard not to feel like you've missed out on something, right? But from an economic perspective, fomo, it's psychological phenomenon, like really associated with something called loss aversion, particularly when it comes to like, financial decision making. According to Huffington Post, in behavioral economics and decision theory, the. The psychology behind FOMO can be partially explained by loss aversion. Like I mentioned before, right? There's these two people, Amos Sversky and Daniel Kahneman. They demonstrate that people's strong tendency to want to avoid any losses. In fact, the research suggests that losses are twice as impactful on people psychologically as gains. And this leads to risk aversion. We just hate to lose out on anything. And that's the quote from Huffington Post. So just to unpack that a little bit, like most people, we, it hurts. I mean, it hurts twice as much to lose something or to feel at least like you lost on something than the gains. I mean, I don't know if any of you gamble but you know, when you gamble, sometimes when you lose money, it hurts. It hurts really bad. Even if you gain, you continue to go because it doesn't, it doesn't provide the same juice or type of emotion as losses do. And so if we have that fear or that hate to lose out on anything, it can honestly inadvertently lead us to trying to get or be part of everything. Does anybody know anybody like that, where they feel like they have to be part of everything because they just don't want to miss out, Right? So it's going to increase your risk, especially when it comes to investing, like getting into hyped up stocks, crypto, whatever it might be, right. The trends of the day, right. For. Because you just don't want to miss out. There's that big FOMO on, you know, missing out on a potentially big payoff and not really looking at the due diligence behind that and not really looking at legitimate value. So I'm the first to admit that I've had issues with this. And we need to all try to avoid this at all costs, especially when the market's hot, right. It's hard not to be caught up in all the craziness. So how do we avoid acting purely due to fomo? I think I have a few actionable steps for you to take. Right. Number one, start with a goal in mind. So we've talked about the analogy of like running to the finish line. I mean, every good sprinter knows that you keep your eyes on the finish line. You just gotta go straight and do where you're going, right? Figure out where you want to be. And then we've talked about reverse engineering, you know, things to get back to figure out how to get there from where you're at today. So some of the things I always ask people, and we talk about a figuring out a goal for yourself. Like, it's like, you know, where do you see yourself in five years, in 10 years, in 20 years? Like, what kind of life do you want to lead? How do you want to spend your time? Like, do you want to retire early or do you plan on gradually retiring? How much additional income are you looking for each month? Right. To fund that lifestyle that you want. And I think it starts with getting crystal clear about that understanding that journey and the different key landmarks that you're trying to hit. Number two. Then once you have those goals, it's nice to create a basic strategy to meet those goals. We've talked about basic investment plans. You know, the white coat investor has the, they have a big course that Talks about creating their investor plan, but insurance investor plan really talks and helps you outline what your goals are, your strategy, you know, what your allocation is and what your allocation should be according to, you know, your interests and then what your timeline should look like. I mean, my strategy from the very beginning, it's. It's just again, been about creating monthly passive income. I think all our lives we're taught to think in terms of monthly income. And we all pay monthly expenses. We get paid at the beginning of each month. But I like to keep it simple. It started with if I can make enough in monthly passive income to cover my monthly expenses, then that creates freedom, right? I mean, that's creates freedom from my day job. Now, you know, I've thought beyond that. Once I hit that, I wanted to make sure that I got my passive income to a point where I can just honestly live how I want to live in terms of the lifestyle that I want to live and also give how I want to give. And so that's been a huge focus for me. And so I've used, you know, a combination of real estate, whether that's owning my own rental properties, investing in syndications funds, and then also, you know, diving into entrepreneurship and building some businesses and actually buying some businesses or actually investing in businesses that produce residual income. And so for you, you have to figure out what your goals are and then create a strategy around how you're gonna do it. Whether that's through real estate, entrepreneurship. Maybe some of you wanna do that through the stock market, but make sure that ultimately you helps you meet your goals. Now, number three, you should be wary of hot tips. I mean, you just have to learn how to do your own due diligence for anything. I mean, I used to be, in the very beginning, like, I used to follow all those, like, stock pickers on TV and on investment websites. I would follow their portfolios and I remember I would print them out and I would take a look at them and I would make buys based on like, what they said to buy, you know, and if I didn't follow it and somehow that stock did well, I'd like look at it and be like, oh my gosh, I should have just followed, you know, I missed out. And so I would just invest like that. And just to be honest with you, I did pretty poorly when it came stock market trying to pick my own stocks. My father also, I think I told a story about how my father, he followed a hot stock tip, you know, from his friends using my Roth ira. And that proved to be Pretty disastrous. I wrote a post about, like, how I lost over a hundred thousand dollars on a hot stock tip, if you guys want to check that out. But knowing how to, like, look at the data and come up with the right conclusion, at least for you, understanding where the risk is and what the benefits are and how to do that assessment, that's a huge part of successful investing. Learning how to do the due diligence, especially if you're investing in things like syndications, you're investing in these passive real estate investments. You know, you might just hear from people, oh, they're a great person to work with. Well, you have to learn how to do the proper due diligence yourself so you don't get caught in the fomo, right? You know, the FOMO wave. I mean, right now there are a lot of properties doing very well. I mean, a lot of these deals are doing very well. I mean, I just had a deal that exited mean a deal that got sold where we had over 100% IRR in one year, it doubled in one year. And a lot of our people of our platinum investor club were part of that. Now when you hear something like that, the people who missed out are like, oh my gosh, I should have just got in. And now they're just going to rush into the next deal with the same sponsor and operator. But again, I had to like, just calm people down and say, look, not every deal will be like that, but make sure you learn how to do your proper due diligence so you know what to get into. That makes sense for you. Now, I think that feeling can happen to anybody. So just be aware of those hot tips. Make sure you know how to do your own due diligence and make sure it fits within your goals. Next, realize that you're never seeing the full picture of other people's investments. Like, you might hear from a friend that they crushed it, right, with a certain investment. But again, that's a certain snapshot in time. You don't know what's gonna happen next. Maybe if that investment came to full cycle, meaning that it was fully realized, let's say they bought a property and it sold, that's great. If they're doing well with it, great. But that might not be what happens later on. You don't know. Also, like what's happened in the past, right? You don't know what losses they've incurred. I mean, I think that people are great about talking about amazing things that's, you know, that, that have happened to them, whether it's online Not a lot of people like talking about their failures. That's something that we've tried to do here quite a bit. We talk about our mistakes again, I've made a ton of mistakes and I've learned a lot from it. But I think that if you just look out there, you're going to see all the, you know, the victories hyped up. And so you may not have the same type of expectation going to these investments without having a full picture of what it looks like, look like in the past. So anyways, I'm just gonna tell you, just let other people's, you know, successes definitely inspire you and motivate you, but also look for some of the failures and mistakes and ask them about it too. Don't just chase their good results. Try to get a full picture and learn more. Just realize, again, you're not seeing the full picture and do your best to try to understand that and figure out where to go next. All right, the next tip is to focus on the long term. Just be patient. And I mean, most people know that this is a long term gain. You know, there are sometimes where you're gonna hit, you know, you're gonna hit a home run every once in a while. But to be honest with you, this is like a marathon. These whole get rich quick schemes or that feeling, like when you get that feeling oftentimes like, you know, do your best to try to temper that. Focus on the long term, not the minute to minute. I mean, otherwise you're gonna end up, you know, watching stock tickers all day and it's gonna drive you crazy and you're busy, you know, you have a lot of things to do. The whole point of creating all this passive income is so that you can free up other parts of your life to enjoy, right, to do the things you love with the people you love. You don't want to micromanage your investments. You definitely don't want to do that. You want to have a basic strategy. Get in there, figure out what works for you in the long term. Whether that long term means, you know, five years, 10 years, whatever that is, and just be steady on the path. Now, the secret is that, you know, you think it's a linear thing. And so sometimes people feel the need to just go for it, hit a home run, because they feel like, okay, at the linear pace, it's not fast enough. But in truth, when you start doing a lot of these passive investments, when you start doing real estate, like, I don't talk about it a lot, but it really becomes like exponential. It grows on each other, you know, in terms of not only the investment itself, but the knowledge and experience you gain. It gets you into better opportunities and better opportunities, and you end up actually growing wealth a lot quicker than you think. So be patient. Focus on the long term. And I have, you know, extreme confidence, and I've seen it so many times that people actually accelerate toward their goals. And, you know, it doesn't end up being just a linear thing, but just that happens when you focus on the long term and you're patient. All right, so next time, you know, you look at an investment and you think like, oh, gosh, I got to get in, or you hear of all the people jumping in, and you realize you don't have the time or you don't that feeling of, like, just jumping in. Before you do your due diligence, take a pause. Just make sure it fits within your goals. Make sure you're able to do that due diligence. Because honestly, if things don't go well, you always want to be able to say, you know what? I tried my best. I did my proper due diligence, and it didn't work out, but I learned from it and I was able to move on. And hopefully that will create more success for you down the line. But you just don't want to get into an opportunity where you're like, I don't even know why I did this. I don't even know why I got in. But I just rushed in because everyone else did it, did poorly, and you didn't really learn from it except to try to avoid FOMO in the future. I mean, this has happened to me many times where I've invested out of fomo, especially early on, and it still creeps up on me. And I just want you to learn from my mistake. Don't do what I did. Jump in, because you know why. And ultimately I know it's going to help you get to where you want to be. Anyways, have a great week. Let's talk again soon. Take care. Enjoy the show. Let me know by dropping a review in the podcast app you're listening to us in. And if you haven't already, make sure to hit subscribe. Are you a part of our community yet? Join thousands of physicians who are also on this journey to creating their ideal lives through multiple streams of income. You can join us on our Facebook group, PassiveIncome Docs, and you can always learn more at our website, passiveincomemd.com thanks again for allowing me to be a part of your journey. See you next time.